All these initiatives will further boost loss-given default assumptions and have been cited by rating agencies in decisions to downgrade European bank debt.

WSJ: Agenda: Basel III��Don't We Have Enough Problems?

If things go south for U.S. steel, into a default situation, the loss on the equity is absorbed by the gains on the CDS, which would pay out the inverse of whatever creditors recover.

FORBES: Blue Mountain's Andrew Feldstein: Three Ways To Play A More Volatile Steel Industry